Rule 27 and portfolio management fees: respondent may defend appellate relief, and genuine business expenditure was allowed.

Rule 27 permits a respondent before the Tribunal to support the appellate order on a ground decided against it, even without filing a cross-objection, and the assessee was entitled to rely on that route to defend the relief granted below. Portfolio management service fees incurred by a non-banking financial company for managing its investment business were genuine business outgoings, and were held allowable as expenditure laid out wholly and exclusively for business purposes rather than capital outlay or an inadmissible claim.

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Issues: (i) whether the assessee, as respondent before the Tribunal, could invoke Rule 27 to support the appellate order on a ground decided against it without filing a cross-objection; (ii) whether portfolio management service fees were allowable as business expenditure in computing the assessee's income.

Issue (i): whether the assessee, as respondent before the Tribunal, could invoke Rule 27 to support the appellate order on a ground decided against it without filing a cross-objection.

Analysis: Rule 27 permits a respondent, though it has not appealed, to support the order under challenge on any ground decided against it. The assessee had succeeded in the ultimate result before the first appellate authority and was therefore entitled to defend that order on a ground adverse to it, even in the absence of a cross-objection. The Tribunal treated the request as maintainable and within the respondent's lawful right to sustain the appellate order.

Conclusion: The issue was decided in favour of the assessee and the Rule 27 objection was rejected.

Issue (ii): whether portfolio management service fees were allowable as business expenditure in computing the assessee's income.

Analysis: The assessee was a non-banking financial company engaged in investment and related financial activities. The Tribunal noted that the portfolio management fees were incurred for managing its investment business, were genuine, and were incurred in the course of the assessee's business. Applying the principle of commercial expediency and the test of expenditure laid out wholly and exclusively for business purposes, the Tribunal held that such fees were not to be treated as capital outlay or as an inadmissible expense. The expenditure was held allowable under the business expenditure provision.

Conclusion: The issue was decided in favour of the assessee and the portfolio management service fees were held allowable as business expenditure.

Final Conclusion: The Revenue's challenge failed because the assessee was entitled to rely on Rule 27 and the disputed portfolio management service fees were held deductible as business expenditure, leaving no surviving basis to disturb the appellate relief.

Ratio Decidendi: A respondent may support an appellate order on a ground decided against it under Rule 27 without filing a cross-objection, and expenditure incurred on portfolio management for an investment business is allowable as business expenditure when incurred wholly and exclusively for business purposes.

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